Privatization and Leverage

Christian At and Pierre-Henri Morand ()

The Journal of Law, Economics, and Organization, 2012, vol. 28, issue 1, 32-44

Abstract: This article studies privatization methods when potential buyers can lever up strategically to maximize their probability of winning. We endogenize the optimal fraction of shares to be auctioned off when privatizing a company. There is a close correlation between the optimal fraction of shares to be sold off and the auction winner's debt level and hence the risk of bankruptcy. The Author 2009. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Date: 2012
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Working Paper: Privatization and Leverage (2009)
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